AUSTRALIA faces an extended slump as evidence mounts the wider economy is failing to pick up the slack from a slowdown in mining.
Two of the nation’s leading economic forecasters have warned the transition away from the mining boom is likely to be slower and more painful than thought.
Latest economic snapshots show low interest rates are failing to spark activity in critical non-mining sectors such as housing construction, leaving the nation at risk of extended below trend growth.
In research to be published today, Deloitte Access Economics says the value of resources projects has fallen for the second consecutive quarter – the first time this has happened in more than a decade.
The pullback has been in planned projects as higher costs, lower commodity prices and a slowdown in China prompts miners to cancel expansion plans.
Despite the pullback, the value of definite resources projects – those already under way or that have funds in place – continued to rise to hit $227 billion at the end of June. The report finds major investment in new liquefied natural gas developments is underpinning much of the current spend.
It comes as oil and gas players launch a national advertising blitz, warning that more than $150 billion of proposed gas developments are under threat from anti-fracking protesters.
Overall, the total value of projects across all sectors fell $51.8 billion over the June quarter to $887.1 billion, Deloitte found.
The value of definite projects rose 3.7 per cent to $468.1 million — the highest on record — while the value of planned projects fell 14.3 per cent to $410 billion.
The Reserve Bank has cut the official cash rate to an historic low of 2.75 per cent in a bid to stimulate the housing sector as the mining boom moves from construction to production.
Deloitte partner Stephen Smith yesterday said the outlook for housing “remains shaky” and it was unlikely to emerge as the key driver of future growth as planned by the RBA.
“With non-residential building approvals well below their pre-GFC levels, and with governments looking to constrain spending, this category of construction activity is looking increasingly unlikely to take over the mantle of growth driver for the Australian economy,” Mr Smith said.
“We do expect a period of below-trend growth for . . . the next couple of years.”
The Deloitte report follows an update from BIS Shrapnel that also warned the transition away from the mining sector would be “a real nail biter”.
BIS Shrapnel associate director Kim Hawtrey said building activity would pick up across the nation over the next two years but the pace would be “uncomfortably slow” and not all states would benefit.
“Home building has been punching below its weight and normally low mortgage rates would be stimulating the sector toward clear recovery by now but the antibiotics are taking longer to work this time around,” Ms Hawtrey said.
“High household debt, concerns about the global economy, planning restrictions in some states and lack of land supply are among the factors that explain this.”
BIS Shrapnel says Victoria will feel the brunt of the pain with housing in oversupply.